US may drag China to WTO again

AGENCIESFeb 1, 2008, 12.00am IST

GENEVA: The US has told China to get serious about relaxing the restraints on financial information providers in a letter that could represent a final warning before the US asks WTO to intervene in the matter.

In the letter to Chinese trade officials, the office of the US Trade Representative (USTR) signalled it has run out of patience with China's refusal to change rules introduced two years ago that appeared to boost the official Xinhua News Agency at the expense of financial information from companies such as Reuters Group and Bloomberg.

The World Trade Organisation said it has yet to receive a formal complaint from the US, which is pursuing China in separate trade cases over rampant Chinese product piracy and measures hindering sales of US-made auto parts, CDs, DVDs and books, in separate cases.

Washington stopped short of saying it would launch a new WTO dispute, said trade officials, who saw the US letter dated January 25, but demanded anonymity because of the sensitivity of the issue. The USTR in Washington refused to confirm the letter or to outline its plans. The Chinese commerce ministry could not immediately be reached for comment.

The restrictions announced in 2006 were part of an effort by the communist government to reassert control over the increasingly porous flow of information and to help transform Xinhua from a purveyor of state propaganda into a modern, profitable news agency.

Targeting the rapidly expanding Chinese market for financial information, the rules make Xinhua both a competitor and regulator, requiring that data, videos and photos be funnelled only through Xinhua-approved distributors. The only currently approved distributor is a Xinhua subsidiary.

The revised Xinhua regulations seemed to back-track on a 1996 agreement, which gave Reuters, Bloomberg and Dow Jones Newswires permission to sell financial information to Chinese banks, government agencies and other institutions.

The rules also formalised already severe restrictions on The Associated Press and other foreign agencies which have sought wider access to the Chinese market, especially ahead of this year's Beijing Olympics.

In a submission to WTO on November 12, the US questioned how Xinhua could be "both a major market competitor of, and the regulator of, foreign financial information service providers.